Patrick McLoughlin says taxpayer will not pay £30 billion for a new hub airport

Date added: February 12, 2013

Speaking at the Commons Transport Select Committee on 11th February, the Transport Secretary, Patrick McLoughlin said that the estimates for a new hub airport for the UK were up to £80 million. A report by Oxera reported recently that a new 4-runway hub airport could need up to £30bn of public subsidy, mainly to cover road and rail links. Mr McLoughlin called these “very substantial figures” and said “We do not generally subsidise airports . . . I am not looking for ways of spending extra money on something provided by the private sector”. Airports in the past have had public subsidies, through road and rail building paid for by the public purse, that benefits the airport. He highlighted how much of the UK’s aviation infrastructure was privately funded. Boris gave evidence, at the same session, promoting his view that there was a need for a new hub, other than Heathrow, and this should be at one of two sites in the Thames Estuary, or at Stansted.

…Mr McLoughlin highlighted how much of the UK’s aviation infrastructure was privately funded, saying: “We do not generally subsidise airports . . . I am not looking for ways of spending extra money on something provided by the private sector.”

New research suggests a hub airport (eg. Thames estuary) for London cannot be built without public subsidy

January 25, 2013 A report by the economic consultants, Oxera, commissioned by the Commons Transport Committee has shown that a massive hub airport in the Thames estuary would only be viable if it had a subsidy, from UK taxpayers, of some £10 – 30 billion (in today’s money). Oxera looked at various scenarios, and found that otherwise such an airport would not be viable or provide the sorts of returns that a private investor would require. Depending on the airport’s design, it could cost £20 – £50 billion. The potential impact on Heathrow and other airports – and necessary compensation – were had to be taken into account, and would have an impact on a new hub airport’s commercial viability. Transport committee inquiry chairman Louise Ellman said: “The results suggest a new airport would require public investment and have considerable impact on Heathrow and other London airports. The research findings also shed significant light on the scale of investment required to deliver essential related surface transport links for any new airport. “We hope this work delivers something new to a crucial debate.” https://www.airportwatch.org.uk/?p=676

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Another example of public subsidy obtained for airport expansion:

Bimingham airport to get subsidy out of public funds for its runway

Here is another subsidy to the aviation industry. Birmingham council has issued invitations to tender for the runway extension and road diversion – about £70 million. It seems Birmingham and other councils will pay for the road, and the airport for the runway extension. But the councils are majority shareholders in the airport. There is also a pledge of £15.7m from the Regional Growth Fund. So while severe spending cuts are being made, the public has to fund airport growth.9.9.2011 (Aviation Environment Federation)

AEF believes that both airport extensions and surface transport enhancements provided for airports should be paid for by the airport operator, not the taxpayer.

The UK in airport subsidies

Does the free market have a free hand?

9.7.2009 (Guardian)

by George Monbiot

A Virgin Atlantic aircraft comes in to land at Heathrow Airport, in London. Photograph: Luke Macgregor/Reuters

Our research shows that over the past 10 years government agencies have spent £80m on helping private enterprise to increase the number of flights. Airports in the UK are – or are supposed to be – commercial operations. Airport companies build them then recoup their money by leasing space and landing rights to carriers and renting out pitches for shops. Until we had completed this research, government policy looked wrong but consistent: the free market was being allowed to let rip, regardless of the environmental consequences. Now we know that the government has intervened to accelerate this growth.

Of the £80m, £17m has been spent by bodies controlled by the national assemblies. Scottish Enterprise has spent £8m on developing air routes between Scottish airports and English or European cities, and on subsidies and grants to British Airways, Ryanair, Loganair and BAA. Invest Northern Ireland has spent £3m on developing new air routes. The Welsh Assembly Government has paid £6m to construct and run a new airport terminal, subsidise the Scottish company Highland Airways, give the airlines discounts for airport charges and market flights from Cardiff to Paris and Barcelona.

£50m cash deal for Cardiff Airport expected by the end of March

20.2.2013 (Wales online)

which contains this statement:

In the short to medium term the Welsh Government would need to inject about £6m a year in capital expenditure and airline route development support – including agreeing to underwrite any losses in the first few years accrued by airlines establishing new routes out of Cardiff.

£19 million subsidy for south west airports

According to Guardian journalist Goeorge Monbiot, The government’s South West Regional Development Agency (SWRDA) has spent £19m in recent years on extending the airport terminals at Bristol and Bournemouth, aircraft parking at Exeter and airport works at Plymouth and Newquay. The subsidies to Bristol Airport were made in 2004 and included £15,000 to pay for an economic assessment and greenhouse gas emissions assessment for a proposed direct scheduled service to New York and £1.5 million towards extending the terminal.

The bulk of the £19 million of SWRDA subsidies were directed at Newquay, so greatly undermining the attractiveness and potential of the existing rail link to the town. Likewise the £4+ million subsidy to Plymouth airport will give airlines a further competitive edge over rail. Now it is possible to fly from Bristol to Newquay in 45 mins for just £29 one-way which, even allowing for airport travel and check-in, is quicker and cheaper than rail (over 4 hrs, £65 off-peak return). Those low air fares owe a lot to public subsidy.

Air travel accounts for less than 1% of total UK business turnover but accounts for 13% of greenhouse gas emissions. You might think curbing the growth in air travel, particularly of domestic flights that can realistically be undertaken by rail or coach, should be the very top of the government’s environmental agenda. Instead we find them pouring millions of our money into subsidies to support air travel at the expense of rail travel.

Airport rail link grounded

The Scottish Government sensationally cancelled the troubled project yesterday amid concerns over public spending cuts.

Over five years in the planning, the £400million link was billed as a massive investment in Renfrewshire’s economy and essential to improve rail links between Paisley and Glasgow.

But, announcing his Budget yesterday, Finance Secretary John Swinney said a “real terms” cut in the amount of money being given to the Scottish Parliament by Westminster and the impact of the recession mean the plan cannot be funded.

European Commission rules on airport subsidy issues

Posted 03 September 2012

The European Commission has concluded that financial arrangements between the airport of Tampere-Pirkkala in Finland and Ryanair do not constitute state aid in the meaning of EU rules because they are in line with market terms.

In another case, the Commission has found investment aid in favour of Chania Airport in Greece to be in line with EU state aid rules, in particular because it is well-targeted and proportionate to the objective pursued. In a third decision, the Commission ordered Ireland to recover incompatible state aid in the form of preferential airport taxes for certain short-haul destinations from the airlines that had benefited from this measure, as they distorted competition between airlines.

Commission Vice-President in charge of competition policy, Joaquín Almunia, said: “Our ultimate aim is to establish a level playing field for all airlines and airports regardless of their business model, from flag carriers to low-cost airlines.

Today’s decisions further clarify the application of principles of EU state aid control to the sector. We will look at other cases of state aid to airports and airlines in the coming months, applying a consistent approach.”